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NEW YORK (CNNMoney.com) -- Oil prices settled higher on Wednesday after a volatile trading day.

The main movers: a government report that showed a decline in gasoline stockpiles for the second straight week and the largest jump in crude inventories in more than seven years, as well as continuing pressure on demand from the global economic slowdown.

U.S. crude for September delivery settled 45 cents higher at $114.98 a barrel.

Prices vacillated between $112.61 and $117.03. The decline in gas stockpiles pushed prices higher, while the surge in oil supplies pulled oil lower, according to Neal Dingmann, director of equity research at Dahlman Rose.

"You are seeing this tug-of-war between commodity fundamentals and also what are the U.S. economic fundamentals," said Dingmann. "That is what is causing oil to go up and down."

Crude: The U.S. Energy Information Administration reported that crude oil inventories climbed by 9.4 million barrels in the week ended Aug. 15. The increase was the largest weekly jump since March 2001, when crude jumped by 11.2 million barrels, according to Amanda Kurzendoerfer, commodities analyst at Summit Energy.

Analysts had forecast a much more modest rise of 1.7 million barrels according to a survey from Platts, an energy research firm.

Directly following the release of the report, oil prices declined more than $3 from their highs. The build in crude stockpiles was "way more than what the market was looking for," said Andrew Lebow, an energy analyst at MF Global in New York.

At 305.9 million barrels, crude oil inventories were in the middle of the average range for this time of year.

The jump in crude stockpiles was magnified by the fact that oil shipments to the United States had been delayed in recent weeks by hurricanes and tropical storms, according to Lebow. "You are just picking up some extra cargos that are just getting counted," said Lebow. "There was a huge surge in imports this week."

Distillate fuel inventories rose by 500,000 barrels last week and were in the upper half of the average range for this time of year. The increase in distillates was less than the 1.2 million barrel jump in supplies that analysts had predicted.

The October crude oil contract becomes the active contract on Thursday, as the September contract expired at the end of trading Wednesday.

Gasoline: Total gasoline inventories fell by 6.2 million barrels and were below the average range for this time of year. This drop was much larger than the 3 million barrels predicted by economists.

"We generally do work off inventories at this time of year - a draw is not unusual," said Lebow. "The extent of the draw is unusual." Therefore, the massive build in crude inventories dominated the movement in the price of oil immediately following the release of the report.

Another reason that the drop off in gasoline stockpiles did not move the price of oil sharply higher is because the level of gasoline stockpiles is still moderate in the big picture, according to Kurzendoerfer.

"The inventory position is not that bad overall," Kurzendoerfer said. "We went from being well above average to now just below the 5 year average," in gasoline stockpiles. "In the grand scheme of things, on an absolute level, it is not that bad."

Demand: According to the report, consumers are still driving less than they did at this time last year. Over the last four weeks, gasoline demand has averaged about 9.5 million barrels per day, which is 1.6% lower than the same period last year.

As consumers have cut back on driving, demand has slipped and gas prices have fallen. According to motor advocacy group AAA, retail gas prices have fallen by nearly 40 cents a gallon over the course of 34 consecutive days.

The price of regular gasoline fell to $3.717 a gallon from $3.73 a day earlier, according to AAA's Web site Wednesday. The price was 9.6% lower than the record high of $4.114 a gallon set July 16.

The government's weekly supply reports have been of particular interest in recent weeks, as traders and analysts have seen demand for crude oil fall off in the past month.

"What we are seeing is a global slowdown in the economy, and that is contributing to the weaker demand numbers that we have seen," said Phil Flynn, senior market analyst at Alaron Trading.

When crude prices were climbing, the market did not think the prices would affect demand, according to Flynn. However, "that concept is starting to change - these high prices are having an effect on global growth and it will slow down demand going forward," he said.

Flynn believes that the massive shift in market psychology has brought energy prices down: "Now people are looking at the market with more reality," he said.